Pricing Policy | Animal Husbandry & Veterinary Science Optional for UPSC PDF Download

Overview of Milk Pricing Policy

• Complex Nature of Milk Pricing:
  • Developing dairy industry emphasizes the need for a well-thought-out pricing policy for milk and its products.
  • Pricing is a complicated matter involving producers, distributors, processors, and consumers, each with their perspectives.
• Challenges in Milk Pricing:
  • Concerns of producers, distributors, and consumers influence the pricing debate.
  • The solution depends on finding a price structure acceptable to all parties involved.
• Global Examples:
  • Advanced dairy nations like New Zealand, Denmark, and the Netherlands have established pricing models.
  • These countries have recognized methods, alternatives, and data for comprehensive pricing studies.
• Indian Scenario:
  • India lacks a comprehensive milk pricing policy.
  • The Agricultural Prices Commission focuses mainly on cereals, leaving the dairy sector unaddressed.
• Objectives of Milk Pricing Policy:
  • Safeguarding the interests of farmers, processors, and consumers is the primary goal.
  • Balancing fair profits for producers, affordability for consumers, and sustainability for processors.
• Producers' Perspective:
  • Producers' prices should reflect the cost of production to ensure a fair profit margin.
  • Consideration of seasonal variations in milk production and market demand is crucial.
• Linking Producers and Consumers:
  • Producers' prices should be aligned with consumer prices, considering overall market trends.
  • The objective is to encourage milk production while maintaining fair prices for consumers.

Understanding Milk Pricing

• Milk Plant Considerations:
  • Producer prices depend on factors like milk plant operations, transportation, processing, distribution costs, and milk procurement capacity.
  • Objectives of the plant, like market goals and product diversification, influence pricing decisions.
• Consumer Price Determinants:
  • Consumer prices are influenced by the population size covered by milk distribution and the income distribution among various groups (lower, middle, higher income).
  • Balancing producer incentives and consumer affordability throughout the year is crucial.
• Trends in Milk Prices:
  • Monitoring trends in milk and milk product prices is essential for assessing economic conditions.
  • Wholesale price index numbers indicate the changing price levels of food articles, including milk, from 1994-2003.
• Index Numbers Overview:
  • The index numbers for milk and all commodities show a parallel increase from 1994-95 to 2002-03.
  • The wholesale price index for milk increased from 110.7 to 147, aligning with the overall trend in all commodities.
• Current Price Fixation System:
  • Existing milk plants and product factories use arbitrary systems for pricing, often unrelated to actual production costs.
  • Milk is purchased based on various criteria, with different prices for seasons and additional premiums for higher fat and SNP content.

Milk Composition Standards and Pricing

• Milk Composition Standards:
  • For cow milk, the recommended fat content is 3.5 to 5.0%, and SNF (Solid-Not-Fat) should be at least 8.5%.
  • Buffalo milk standards are higher, with 5.0 to 7.0% fat and a minimum of 9.0% SNF.
  • Additional bonuses, ranging from one to three paise per liter, are offered for every 0.1% increase in fat content.
• Two-Axis Milk Pricing Policy:
  • To boost cow milk production, a pricing policy is needed, providing ample incentives.
  • Proposals to set cow milk prices equivalent to buffalo milk face operational challenges in ensuring quality and purity.
  • The National Dairy Development Board introduced a two-axis pricing policy, determining rates based on relative fat and SNF values.
  • This approach discourages buffalo milk adulteration, ensuring a unified pricing strategy for both cow and buffalo milk.
• Pricing Based on Composition Quality:
  • The two-axis policy evaluates milk compositionally, considering fat and SNF components.
  • Proportions between fat and SNF values are crucial for accurate pricing.
  • Milk producers submitting their milk to cooperative societies have fat content assessed through samples, and SNF is measured with a lactometer.
  • A customized reckoner is essential for different seasons and local fat and SNP prices to calculate milk prices accurately.

Factors Affecting Milk Pricing

• Temperature Influence on Pricing:
  • The milk temperature at 7°C results in a Corrected Lactometer Reading (CLR).
  • Deviations from 7°C require adjustments in the lactometer reading for every 10°F difference.
  • For instance, if the lactometer reading is 27 at 74°F, the CLR becomes 26 (27-1), and at 94°F, it becomes 28 (27+1).
• Impact of Direct Sales on Adulteration:
  • Cooperative milk collection centers link milk prices to fat and SNF, discouraging adulteration.
  • However, when farmers sell directly to consumers or vendors, there's a risk of water adulteration, as the regulated system may not be strictly followed.
• Intra-year Seasonality in Milk Prices:
  • Seasonal variations exist in milk prices at collection centers, unrelated to typical demand and supply factors.
  • Summer months experience lower production, resulting in a surplus, but higher fat content leads to increased prices.
  • In winter, higher milk production creates a surplus, while lower fat content contributes to reduced prices.
  • Seasonal trends in milk prices follow production patterns and fat content changes, despite assured quality-linked prices for farmers.